The national government has revealed plans to slash retirement perks civil servants take home at the end of their careers.
This follows a directive by the Salaries and Remuneration Commission (SRC) to address the ballooning pension bill in the country.
The salaries commission in its plan that would see civil servants lose some of their benefits, plans to overhaul the entire system used in arriving at the benefits remitted to them at the end of their service.
To achieve this formula, SRC has started bench-marking against some successful private sectors and even other countries that have proper pension schemes.
The plans are already at an advanced stage with now the commission seeking a consultant to carry out the review for a period of six months before submitting the findings of a new structure for compensating retiring civil servants.
The plans were initially announced in December 2021, inviting even the public to share their views on a proper method that should be used to derive at retirement benefits. This was in compliance of the Constitution that has public participation as a mandatory procedure in policy formulation.
“The consultant shall be required to develop policy guidelines for streamlining the management and administration of retirement benefits in the public service” SRC stated in a tender notice.
“The need to undertake the exercise is key to managing the pension bill to ensure its affordability and fiscal sustainability and in addressing the existing disparities in the provision of retirement benefits to ensure the benefits are harmonised, fare and equitable.”
The review marks the Lyn Mengich-led Commission's latest attempt at trimming the country’s wage bill, given that it is also working on a review to cut allowances to bring down the workers’ overall compensation.
The national government is expecting to spend Ksh146 billion in pensions uptake in the financial year starting June 2022.
The amount is five times higher than what the civil servants received in retirement packages last eight years ago.
In 2020, the government adopted a new scheme where civil servants were required to partly pay for the pension easing pressure on the national government.
The scheme required them to contribute 7.5 per cent of their gross salary to the scheme while the government foots 15 per cent.
The decision to change the pension scheme was informed by a valuation report in 2014 where SRC established that it is a liability stretching to Ksh990 billion.
This has continued to expand to over Ksh2.6 trillion which is about 30 per cent of the Gross Domestic Product (GDP).
